Income growth favored consumers enough in October to offset the impact of higher prices, lower incentives, and higher auto loan rates. New-vehicle affordability improved slightly month over month and year over year, according to the Cox Automotive/Moody’s Analytics Vehicle Affordability Index.

“In October, strong income growth and smaller financed amounts helped the consumer overcome negative vehicle market dynamics,” said Cox Automotive Chief Economist Jonathan Smoke.

The typical payment increased by 0.2%, but the number of median weeks of income needed to purchase the average new vehicle declined to 38.6 weeks from a downwardly revised 38.7 weeks in September. At 38.6, it was lower than the 40.1 weeks recorded last October.

Both median income and the Kelley Blue Book average new-vehicle transaction price increased by 0.3% in October, while manufacturer incentives decreased. The October data included substantial upward revisions to estimates of median income following the release of the Federal Reserve’s latest Survey of Consumer Finance. The typical new-vehicle loan interest rate increased to 10.55%, which was a new peak. As a result of these changes, the estimated typical monthly payment increased by 0.2% to $767 from an upwardly revised $766 in September. The average monthly payment peaked at $795 in December 2022.

New-vehicle affordability in October was better than a year ago when prices were higher, but interest rates were more than two percentage points lower. The estimated number of weeks of median income needed to purchase the average new vehicle in October was down 3.7% from last year.